TKB v. COKA

FCMC 2648/2018

[2020] HKFC 272

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2648 OF 2018

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BETWEEN

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D E C I S I O N

( Variation of Interim Maintenance )

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1.  This is the application taken out by the petitioner (“H”) to discharge the order for interim maintenance made by DDJ Tse Ching (as she then was) (“Judge Tse Ching”) on 13 December 2018 (“Interim Order”), pursuant to which he was ordered to pay as follows:

a. the matrimonial home’s mortgage, rates and management fees, utilities, school fees, school bus fees, school trips and school related expenses; and

b. interim maintenance for the 2 children of the family for $22,000 per month until further order.

2.  The payment made by H is about $70,000 per month under the Interim Order.  H has paid up to the end of 2019 and now asks to discharge the Interim Order with effect from January 2021.

Brief Background

3.  H is now 53 years old and currently resides in Malaysia. He used to do parallel importing business back in early 2000s. His business closed in around 2011. He then mainly relied on stock trading for his income for a few years. He had been not employed since the cessation of his business. He claims to work a clerical job with a monthly income of about $5,461 in Malaysia.

4.  W is now 49 years old and is a housewife residing in Hong Kong with two sons at the former matrimonial home in Sorrento Tower.

5.  Parties were married in 2002. H says the parties separated in 2010 whilst W says the parties separated in 2015. H filed his Petition in March 2018. Decree Nisi was granted on 14 August 2018.

6.  Parties have two children: R, born on 28 May 2003, and C, born on 21 November 2009 (collectively “Children”). By consent, an order of joint custody of the Children be granted to the parties and care and control to W with reasonable access to H on 13 December 2018.

Legal Principles

7.  The parties do not have any dispute on the relevant legal principles. 

8.  The jurisdiction of the Court making to vary, discharge or suspend temporarily an order is conferred by in section 11 of Matrimonial Proceedings and Property Ordinance (“MPPO”) (Cap. 192). It applies to interim order pending suit – see section 11(2)(a).

9.  When approaching a variation application, “the court shall have regard to all the circumstances of the case, including any change in any matters to which the court was required to have regard when making the order to which the application relates…”  – see section 11(7) of MPPO.

10.  The modern approach in dealing with an application for variation of maintenance is that the court looks at it de novo. The principles summarised by Cheng JA in AEM v VFM [2008] 3 HKLRD 36 at §14, in particular the following sub-paragraphs:

“4. The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh: Flavell v Flavell [1997] 1 FLR 353 at 357B following Lewis v Lewis [1977] 1 WLR 409 and Garner v Garner [1992] 1 FLR 573.”

11.  Jackson’s Matrimonial Finance and Taxation, 9^th edn., at §3.154 reads:

“The modern approach is that the court has to consider all the circumstances of the case, and the court is not hide-bound by the existence of a previous order; the court must look at the matter de novo and make an order that is reasonable in the current circumstances. The usual basis on which a variation of an order for periodic payments is founded is that there has been a material change in the circumstances of one of both the parties. On application for revision, the court, as it was put in one case, has regard to all the circumstances of the case in the same manner as if those circumstances had existed at the date of the original order.”

12.  In AEL (NEE AEC) v MRL (Variation of Maintenance Pending Suit) [2009] HKFLR 131, HHJ Melloy accepted that all the circumstances of the case, including any change relating to any matters brought to the attention to the court previously, could be considered, although a variation of maintenance pending suit is usually associated with a material and significant change of circumstances.

13.  Although all the circumstances may include all the factors as set out in section 7 of MPPO, this court is now dealing with variation of an interim maintenance order rather than a final maintenance order after the ancillary relief trial.  It is clear that whether to allow variation is ultimately an exercise of discretion upon considering all the circumstances.

14.  In §16.17 of Rayden & Jackson on Divorce and Family Matters, 18^th Edn., maintenance pending suit is described as follows:

“The Court has an unfettered discretion to award such sum as it thinks reasonable. There is no hard and fast rule, and no fixed proportion: each case depends on its own facts. It has been said that the approach to maintenance pending suit should be empirical, and that in the ordinary sort of case that the district judges who deal with these applications will have to take a broad view of means on the one hand and income on the other and come to a rough and ready conclusion, or take a “broad brush approach”. The overall consideration is the actual needs of the parties’ pending suit.”

15.  In §16.18 of Rayden, it is further stated as follows:

“…what really matters is the immediate and reasonable requirements of the wife balanced against the ability of the husband to pay for them, assessed using a broad-brush approach.”

16.  For principles relating to maintenance pending suit, as stated in Court of Appeal case HFJC v KCY [2012] 1 HKLRD 95:

“37. The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness…. For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i. The sole criterion to be applied in determining the application is ‘reasonableness’, which is synonymous with ‘fairness’.

ii. A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

iii. In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing. That budget should be examined critically in every case to exclude forensic exaggeration.

iv. Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation, the court should err in favour of the payee.

38. Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a ‘broad-brush’ basis.”

17.  For principles relating to drawing adverse inference for non-disclosure, in a more recent case NG v. SG [2011] EWHC 3270 (Fam), [2011] All ER (d) 180 (Dec), Mostyn J gave a useful summary on the consequence of non-disclosure by either party, which is adopted by the Court of Appeal in Z v X [2015] 5 HKLRD 791. When relying on available evidence to draw appropriate inference and to embark on guesswork, the court concluded the following steps to avoid unjust results:

“[16] Pulling the threads together it seems to me that where the court is satisfied that the disclosure given by one party has been materially deficient then:

(i) The court is duty bound to consider by the process of drawing adverse inference whether funds have been hidden.

(ii) But such inferences must properly drawn and reasonable. It would be wrong to draw inferences that a party has assets which, on an assessment of the evidence, the court is satisfied he has not got.

(iii) If the court concludes that funds have been hidden then it should attempt a realistic and reasonable quantification of those funds, even in broadest terms.

(iv) In making its judgment as to quantification, the court will first look to direct evidence such as documentation and observations made by the other party.

(v) The court will then look to the scale of business activities and lifestyle.

(vi) Vague evidence of reputation or the opinions or beliefs of third parties is inadmissible in the exercise.

(vii) The Al-Khatib v Masry technique of concluding that the non- discloser must have assets of a least twice what the claimant is seeking should not be used as a sole metric of quantification.

(viii) The court must be astute to ensure that a non-discloser should not be able to procure a result from his non-disclosure better than that which would be ordered if the truth were told. If the result is an order that is unfair to the non-discloser it is better that than the court should be drawn into making an order that is unfair to the claimant.”

H’s case

18.  In gist, H said that he no longer has the ability to pay as his assets are now exhausted and he has already ceased paying the respondent (“W”) since January 2020.

19.  H rejoined the workforce in Malaysia in November 2019 for a monthly salary of around $5,461. He only has cash of about $140,000 with the nil value of stocks but he has the net negative assets of about $1.5 million after taking into account of his liability.

20.  H claimed that W has cash of about $1.2 million in her bank account and has been receiving rental of a property of Inverness Villa (“Inverness Villa property”) since 2006, which was originally jointly owned by W and her father and subsequently W transferred her half interest to her father in August 2017.  The property is now free from mortgage.

21.  H has taken out a section 17 application in respect of the Inverness Villa property, which has not yet been set down for substantive argument.

22.  H also raised the issues of W’s dissipation of $7 million and availability of third-party resources.

W’s case

23.  W accused H that he fails to make full and frank disclosure of his finance and has hidden some substantial assets.  She invited this court to draw adverse inference against H.

24.  W claims no longer enjoying the rental income from the Inverness Villa Property since July 2020 due to the termination of tenancy.

Discussion

25.  It is not disputed by the parties that when making the Interim Order, Judge Tse Ching drew adverse inference against H’s ability to pay based on the documents produced by him concerning his income from stock trading at that time.  Hence, the main issue of this application is whether this court shall continue to draw adverse inference against H’s ability to pay.

26.  Mr Lung for W submitted that H’s case is inherently incredible, for instance, there were a lot of significant cash withdrawals in many years, especially from 2013 to 2014.  In my view, as most of the withdrawals happened more than 4 to 5 years before the commencement of the divorce petition or from the date of his answer, it is understandable that the recollection of H may not be very clear and accurate as to the reasons for such withdrawals.   Although Mr Lung seemed to suggest that H has planned to hide his assets well before the commencement of the divorce petition, I think that this submission is a mere speculation without any solid proof.  Besides, as Mr Chan for H rightly pointed out that the court should not simply look at the withdrawals of cash in the H’s accounts but have to calculate the total deposits of cash into such accounts for the same period of time.  As Mr Lung fails to show whether there is a significant difference, I do not think that at this stage, it is justified for the court to draw adverse inference against H simply based on some cash withdrawals by him in certain period of time.

27.  On the other hand, Mr Chan for H also submitted that after making this application, H has provided possibly more than 10,000 pages of documents, such as bank statements etc, to W as exhibits to his answers to W’s questionnaires and his affirmations concerning his stock trading and that H has discharged his duty to make full and frank disclosure.

28.  H further explained in his affirmation as to why he became a lot less active in doing day trading of stocks.  Although W refuses to accept these reasons, I consider that they are not unreasonable.  In any event, I do not think that more active stock trading means more profit will be made or vice versa, namely less active trading will result in less profit.  Indeed, no one can guarantee or has the crystal ball that H can make or continue to make profit by stock trading in the future even though he may be very successful in doing the stock trading in the past.   For the purpose of this application, I accept that H has ceased stock trading based on the documents produced by him, especially when the value of stocks now shown in the securities’ accounts is zero, which cannot be challenged by W.

29.  Indeed, I think the real question is whether H has hidden the profit from stock trading or other substantial assets.  To start with, H said in his affirmation that for about 9 years from 2011 to 2019, he got the net profit from stock trading in the sum of around $2.7 million, which is roughly $300,000 a year or $25,000 a month.  H submitted a lot of statements in support whilst W produced no evidence to challenge this figure of $2.7 million.  Therefore, I have to find that for the purpose of this application, H is unable to pay and to comply with the Interim Order based on the profit from stock trading even plus the income of his job in Malaysia, not to say his own personal expenses.  In any event, I have some reservations as to whether the court should order H to sell his assets eg the stocks in hand whether disclosed or undisclosed so as to comply with the Interim Order.  Similarly, even W has around $1.2 million cash in her bank putting aside the Inverness Villa property which shall be rented out as soon as possible, the court does not have jurisdiction to order her to use or sell the capital assets in order to pay the Children’s expenses. 

30.  Despite the submission of Mr Lung for W that H was used to pay off all the Children’s expenses, I do not think that there is sufficient evidence to show that H has hidden substantial assets at this stage.   Even if H did hide some assets, like significant amount of cash or stocks in an undisclosed account for secret stock trading, it will be very difficult for the court to draw adverse inference against him as to how much profit he is able to make based on the suspected amount of cash or stocks.  In any event, W simply fails to attempt a realistic and reasonable quantification of the alleged hidden assets as required by the Court of Appeal in Z v X.  On the other hand, H has no more stocks for trading according to the documents produced by him.

31.  Regarding H’s employment in Malaysia earning about $5,461 per month, there is no evidence before me that he is able to get a better job in Malaysia.  Mr Lung submitted that the living standard in Malaysia is lower than in Hong Kong.  If I accept this submission, it must mean that for the same job in Malaysia, its salary should be lower than in Hong Kong.  Hence, it is difficult to say that H’s income is unreasonably low. 

32.  It is not in dispute that H was running a successful business for parallel importing in Hong Kong which has been closed in 2011, more than 9 years ago.  Thereafter, H’s income mainly relies on the profit from his stock trading.  In the circumstances, I do not think that he can be said to have a very high earning capacity, in particular he does not have any professional qualification.  Certainly, I would not regard him as a professional stock trader similar to a fund manager.

33.  According to the well-established legal principles, the court is entitled to draw adverse inference against the payer if the disclosure of his finance is materially deficient.  However, I do not find that H's disclosure is materially deficient in view of his production of over 10,000 pages of documents concerning his stock trading.  Mr Lung fails to show how material the disclosure is deficient.  It is against the legal principles for the court to conduct a detailed investigation into the parties’ finance for the present application. Having considered the documents produced by H, I refuse to draw adverse inference against him for the purpose of this application.  However, I would add that after trial for ancillary relief, when the trial judge has the chance to hear the oral testimonies of the parties which are subject to the cross examination of the other side, the trial judge may come to a different conclusion from me.

34.  Besides, I agree that the parties’ standard of living during marriage is a typical upper-middle class family, which is agreed by H.  Nonetheless, it does not mean that such living standard can be maintained after separation or divorce, which wholly depends on the parties’ current finances.  In the present case, I am satisfied that H is unable to pay and the parties including the Children may have to lower down their living standard accordingly.

35.  Mr Lung for W submitted that as para 3 of the Interim Order required H to reimburse W in relation to school trips of the children already spent in the sum of $11,700, which has been paid by H, so it is not variable.  I agree although I have some doubts as to the court’s jurisdiction for making a lump sum order for interim purpose.

36.  Mr Chan for H further submitted that W has engaged in a series of dissipation of assets with her parents.  In my view, it is not necessary and inappropriate for me to make any comments on this issue.  As there is an outstanding section 17 application against W, this issue may be better to be resolved at the substantive hearing of such application in the future.

Conclusion

37.  Having regard to all the circumstances of the case, including the change in the matters to which the court was required to have regard, I consider that the Interim Order has to be varied.  I now make an order in terms of paras. 1 to 3 of H’s summons dated 18 May 2020 except no variation be made for para 3 of the Interim Order.

38.  Regarding the question of costs, since this application is determined on a broad brush approach without going into detailed investigation of the finances of the parties as any under or over payment can be adjusted at the final trial for ancillary relief, I make a cost order that costs of this application be reserved to be determined after the ancillary relief trial.